Bank of Valletta plc - Interim Directors’ Statement

On 27 July, Bank of Valletta plc issued its interim Directors’ Statement in which the Directors explained that following the extremely negative economic situation that prevailed during the first half of the Group’s financial year to 31 March 2009, cautious optimism has gradually emerged in the international financial markets since mid-March with both equity and debt markets improving and the positive investor sentiment being sustained to date.

The Directors stated that as a result of these improved market conditions, the Group’s third quarter has seen a write-back of a proportion of the markdowns incurred on the Financial Markets and Investments book during the first six months to 31 March 2009 which totaled €31.8 million. The Group explained that interest margins still remain under pressure but are gradually improving as deposits re-price and measures taken for the widening of certain lending margins are implemented.  Furthermore, competition for deposits remains keen which has in turn been reflected in average rates continuing at levels well above the ECB intervention rate. Also, notwithstanding the number of bond issues that took place on the local stockmarket during this period, the BOV Group experienced a sustained and encouraging growth in deposits whilst loans and advances have also continued to grow in both the Home Loan and Business sector. The Directors remarked that banking fees and commissions showed a marginal improvement and costs have been controlled at the 2008 full-year levels.

The BOV Directors stated that the profitability of the Bank for the third quarter was significantly higher than that reported during the interim stage mainly due to the write-back in the Financial Markets portfolio. The Directors expressed their hope that the growing confidence in the international credit markets will be sustained. However BOV stated that conditions in the Maltese economy remain uncertain and as a result some deterioration in credit quality is expected to be experienced (principally if the current economic downturn continues beyond 2009) as the international economic downturn remains challenging.

Moreover, the Directors explained that the Group has continued to manage its business in a prudent and cautious manner with the liquidity ratio maintained at a high level especially following the successful €50 million bond issue completed in June which added a further 1.5% to the Group’s strong Capital ratios. The Directors concluded by stating that the Bank has continued to make credit available throughout the period and has supported its customers and the Maltese economy as a whole.

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